PRRS Compendium Producer Edition - National Pork Board

offset by any decrease in feed conversion). The
net partial budget equation yields a value for net
difference (ND). ND = [(AI + RE) – (RI + AE)]
An example of the partial budget format is
shown in Table 7.
To use the partial budget assessment, estimate a
value for each of the appropriate categories comparing
the impact of the intervention strategy to
your baseline (current performance with no intervention).
Once all potential changes associated
with the intervention are accounted for, a net
difference to the operations can be calculated.
The subtotal of (additional income + reduced expenses)
minus the subtotal of (reduced income +
additional expenses) is an estimate of the impact
the intervention will have on the operation measured
as a “net difference.”
The net difference (or net return) for the interven- Additional facilities X
tion can then be used to calculate the benefit: Table : Partial budget format with potential intervention
cost ratio. The “net difference” from the partial
budget includes the influence of the direct cost
budget items
of the intervention. In contrast, the “benefit:cost ratio” (BCR) is calculated by dividing the net return, excluding
the direct cost of the intervention (DCI) (i.e., “benefit”), by the direct cost of the intervention (i.e.,
“cost”), resulting in a “benefit:cost ratio.” That is, BCR = AI + RERI + AE - DCIDCI
An example of the use of partial budgeting and the subsequent benefit:cost ratio is described in the literature
as a case study in which the impact of vaccination with a modified-live PRRS vaccine at weaning in
a system with a PRRS stabilized breeding herd and unstable growing pig herd was evaluated (Polson et
al., 2000). Weighing the “benefit” (as measured by a reduction in mortality from 5 to 3% and an improvement
in ADG from 0.59 to 0.79 pounds per head per day) against the “cost” (additional expense of vaccine
and labor to administer) resulted in a benefit:cost ratio range of 2.4:1 to 22:1, depending upon the value of
feeder pigs ($0.30 to 0.90 per pound).
A BCR of 2.0 means that there is a $2.00 benefit for every $1.00 of direct intervention cost. In contrast, a
BCR of 0.5 means that there is only a $0.50 benefit for every $1.00 of direct intervention cost. Where the
BCR is 1.0, there would be a $1.00 benefit for every $1.00 of direct intervention cost.
When doing partial budgets, it is also of value to do a “sensitivity analysis” (Boehlje and Eidman, 1984).
As previously demonstrated in Table 3, a sensitivity analysis involves varying some of the input measures
(impact on performance, feed cost, market price, intervention cost) to see how they change the output
measure (net difference or benefit:cost ratio). In this way, you can assess the potential impact of an intervention
if the effect was smaller and/or greater than what you expected.
References
Boehlje MD, Eidman VR. 1984. Farm Management, pp. 237-242.
Potential intervention
budget items
Dee SA, Bierk MD, Deen J, Molitor TW. 2001. An evaluation of test and removal for the elimination of porcine reproductive and respiratory syndrome
virus from five swine farms. Can J Vet Res 65:22-27.
Dee SA, Joo HS, Park BK, et al. 1998. Attempted elimination of porcine reproductive and respiratory syndrome virus from a seedstock farm by
vaccination of the breeding herd and nursery depopulation. Vet Rec 142:569-572.
Dee SA, Joo HS, Polson DD, Marsh WE. 1997. Evaluation of the effects of nursery depopulation on the profitability of 34 pig farms. Vet Rec 140:498-500.
Dee SA, Joo HS. 1993. PRRS clinical management and control: Eradication from herds. Proceedings of the Allen D. Leman Swine Conference, pp. 93-97
Dee SA, Joo HS. 1994. Factors involved in successful eradication of PRRS virus using nursery depopulation. Proceedings of the American Association
of Swine Practitioners, pp. 239-243
Dee SA, Philips RC. 1998. Using vaccination and unidirectional pigflow to control PRRS virus transmission. Swine Health and Production 6(1):21-25.
Additional
income
Potential outcomes
Increased pigs weaned X
Increased pounds sold X
PAGE
Reduced
expenses
Improved feed conversion X
Reduced animal treatments X
Potential intervention options
Reduced
income
Additional
expenses
Diagnostic submissions X
Vaccination X
Labor X
Closed herd/depopulation X
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